RED CLAUSE Vs. GREEN CLAUSE

RED CLAUSE LETTER OF CREDIT
In the case of a red clause letter of credit (letter of credit with advance payment) the seller can request the advance payment of an agreed amount (defined in the terms and conditions of the letter of credit) from the correspondent bank. This is basically intended to finance the production or purchase of the goods to be delivered under the letter of credit. The advance is normally paid out against receipt and the written undertaking of the beneficiary to subsequently deliver the transportation documents by an agreed date.

GREEN CLAUSE LETTER OF CREDIT
In the case of a green clause letter of credit (letter of credit with advance payment) the beneficiary can request the advance payment of an agreed amount (defined in the terms and conditions of the letter of credit) from the correspondent bank. This is basically intended to finance the production or purchase of the goods to be delivered under the letter of credit. Unlike the red clause letter of credit the advance is not paid out against receipt and the written undertaking of the beneficiary to subsequently deliver the transportation documents by an agreed date, but an additional document is also always required providing proof that the goods to be shipped have been warehoused.